CMD 2013: Valmet's path forward
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Valmet, under President and CEO Pasi Laine, aims to become a global leader in the pulp, paper, and energy industries by focusing on customer excellence, technological innovation, and process optimization. The company showcases stable growth with a strong services business and significant market presence, particularly in emerging markets. Valmet's strategy includes cost reduction, market expansion, and the introduction of new technologies to drive profitability and sustainability.
CMD 2013: Valmet's path forward
- 1. Valmet’s path forward Pasi Laine, President and CEO November 26, 2013
- 2. Agenda Valmet in brief Investment highlights Valmet Must-Wins Market outlook and profitability 1 Capital Markets Day 2013 2 3 4 Summary5
- 4. Valmet’s road to becoming a global market leader November 26, 2013 Pasi Laine, CMD 20134 1942 Rauma- Raahe 1951 Valmet 1951-1995 Several M&As 1968-1996 Several M&As i.e. 1986 KMW 1987 Wärtsilä paper finishing machinery 1992 Tampella Papertech 1999 Metso created through the merger of Valmet and Rauma Key acquisitions 2000 Beloit Technology 2006 Kvaerner Pulping Kvaerner Power 2009 Tamfelt End of 2013 Demerger to create Valmet and Metso 1797 Tamfelt 1856 Tampella 1858 Beloit 1860 KMW 1868 Sunds Defibrator
- 5. Valmet’s historical performance November 26, 2013 Pasi Laine, CMD 20135 1) Carve-out figures for 2010-2012; as reported for Metso’s Pulp, Paper and Power segment for 2006-2009 • Services has been growing steadily • Cyclicality in capital business • EBITA-% has been relatively stable over time Net sales and EBITA before NRI (EUR million)1 636 834 847 715 877 974 1,011 809 5.5% 6.3% 7.1% 5.6% 6.5% 7.6% 6.4% 5.3 % 4.1% 2006 2007 2008 2009 2010 2011 2012 Q1-Q3/13 Services Capital EBITA-% 2,092 2,925 2,735 2,061 2,453 2,703 3,014 1,946 115 184 194 116 159 205 192 79 EBITA before NRI (MEUR) EBITA target 6-9%
- 6. 34% 39 % 27% Capitalizing on the growing pulp, energy, tissue, and packaging board needs globally November 26, 2013 Pasi Laine, CMD 20136 17% 13% 11% 40% 19% South and Central America Asia-Pacific China North America EMEA Services Pulp and Energy Paper Sales1Global market leader with #1-2 market positions in all markets served Stable, growing and profitable EUR 1 billion services business High barrier to entry capital business with good long-term growth potential in businesses such as board, tissue, pulp and biotechnology 2012 figures1 Net sales1 EUR 3,014 m Profit2 EUR 192 m Employees 12,000 Position #1-2 Services #1-2 Pulping #1-2 Bioenergy generation #1-2 Paper, board, tissue 1) Carve-out figures for the periods indicated, 2012 2) EBITA before non-recurring items
- 7. Our three business lines serve the same customer base November 26, 2013 Pasi Laine, CMD 20137 Services Net sales1 1.0 bn, 34% • Mill and plant improvements • Roll and workshop services • Parts and fabrics • Life-cycle services Pulp and Energy Net sales1 1.2 bn, 39% Technologies and solutions for • Pulp production • Power generation • Biomass conversion Paper Net sales1 0.8 bn, 27% Technologies and solutions for • Board • Tissue • Paper 1) Net sales by business line on a carve-out basis for the periods indicated (excl. Intra-Metso net sales) 877 974 1,011 748 2010 2011 2012 1-9/2013 698 975 1,189 666 2010 2011 2012 1-9/2013 875 743 805 522 2010 2011 2012 1-9/2013
- 8. Strong global presence – good platform for growth November 26, 2013 Pasi Laine, CMD 20138 North America • Large installed base to be serviced • Growth opportunity in increased outsourcing • Capital project oppor- tunities in tissue and board South and Central America • Capital project opportunities in pulp, tissue and bioenergy • Good services growth potential EMEA • Large installed base to be serviced • Growth opportunity in increased outsourcing • Machine closures in printing and writing • Capital project opportunities in pulp, tissue, and bioenergy Asia Pacific • Capital project opportunities in pulp, tissue, and board • Good services market with growth potential China • Capital project opportunities in board and tissue • Good services market with growth potential Net sales1) EUR 572 m Net sales1) EUR 324 m Net sales1) EUR 512 m Net sales1) EUR 398 m Net sales1) EUR 1,208m 419 employees 7,850 employees 613 employees 1,112 employees 2,084 employees 1) Net sales breakdown by area on a carve-out basis for 2012 and breakdown of employees by area on a carve-out basis as at June 30, 2013
- 9. Key customers Key customersKey customers Serving global customer base November 26, 2013 Pasi Laine, CMD 20139 Valmet is a registered trademark of Valmet Corporation. Other trademarks appearing here are trademarks of their respective owners. Services Pulp and Energy Paper Yunnan Yun-Jing Forestry & Pulp Mill
- 10. November 26, 2013 Pasi Laine, CMD 201310 Valmet’s way forward Vision To become the global champion in serving our customers Must-wins > Customer excellence > Leader in technology and innovation > Excellence in processes > Winning team Mission Converting renewable resources into sustainable results Strategy Competitive technologies and services to the pulp, paper and energy industries. Strong commitment to move our customers’ performance forward.
- 11. Valmet’s Must-Win initiatives and objectives November 26, 2013 Pasi Laine, CMD 201311 • Reduce quality costs • Savings in procurement • Reduction in lead times • Improve health and safety • Improve project and service margin • Implement cost competitiveness program to reach EUR 100 million cost savings • Strengthen our presence close to customers and growth markets • Strengthen Key Account Management to enhance growth at the customer • Drive service growth through long-term agreements and expanded customer base • Improve product cost competitiveness to increase gross profit • Create new revenue from biotechnology solutions and new offering • Strengthen high-performance culture • Continue further globalization of our capabilities to be closer to customers 1. Customer excellence 2. Leader in technology and innovation 3. Excellence in processes 4. Winning team Primary Must-Win objectivesMust-Wins
- 12. Experienced management team 12 Corporate Business lines Areas Pasi Laine President and CEO Markku Honkasalo Chief Financial Officer Kari Saarinen Head of Strategy and Operational Development Julia Macharey Head of Human Resources Anu Salonsaari-Posti Head of Marketing & Communications Jukka Tiitinen Business Line President, Services Jyrki Holmala Business Line President, Pulp and Energy Jari Vähäpesola Business Line President, Paper William Bohn Area President, North America Celso Tacla Area President, South America Hannu Mälkiä Area President, EMEA Aki Niemi Area President, China Hannu T. Pietilä Area President, Asia-Pacific November 26, 2013 Pasi Laine, CMD 2013
- 14. Investment highlight summary 14 Established market leader with #1-2 market positions in all markets served Stable, growing, and profitable services business with over EUR 1 billion sales provides good visibility and resilience Long-term growth potential in capital business from increase in pulp, energy, board and tissue consumption and from substitution of fossil fuels Global diversified footprint with large exposure to growing emerging markets Strong focus on profitability improvement 1 2 3 4 5 November 26, 2013 Pasi Laine, CMD 2013
- 15. Established market leader with #1-2 market positions in all markets served 15 Market position Services #1-2 Pulping #1-2 Bioenergy generation #1-2 Board #1-2 Tissue #1 Paper #1-2 Machines • 3,800 pulp and paper mills in the world • Over 50% purchase services from Valmet Large installed base • 200 wood-handling systems • 470 cooking systems • 300 complete fiber lines • 400 evaporation systems • 350 recovery islands • 200 mechanical pulping lines • 270 fluidized bed boilers • 120 BioGrate boilers • 400 environmental protection systems • 700 board machines • 180 tissue machines • 900 paper machines Consistent investments in R&D 2010-2012 average ~EUR 70 m (2.5% of sales) Extensive IP portfolio ~1,800 protected inventions – June 30, 2013 >70 new products launched per year Pulp Energy Paper 1) Net sales in 2012 on a carve-out basis 1 Superior technological know-how November 26, 2013 Pasi Laine, CMD 2013 Services (>EUR 1 bn)1 Capital (~EUR 2 bn)1
- 16. EUR 1 billion of net sales from stable and growing services Strong trends driving services market expansion Customers outsource non-core operations Capacity increases in China, South America and Asia-Pacific Customer cost pressure and efficiency requirements increase demand for process improvements and maintenance services Machine closures in EMEA region and North America Large target market1 Comprehensive offering 16 1) Management estimate based on the size of Valmet’s services markets using an average services cost per volume produced, based on Valmet’s existing customers and estimates of current and forecasted growth in total production volumes 2) Annual growth between 2010 and 2012 based on available carve-out financials >7.4% 2010-2012 p.a.2 2 EUR 7.0 bn Valmet services business line growth Spare and wear parts Fabrics Mill and plant improvements Roll and workshop services November 26, 2013 Pasi Laine, CMD 2013
- 17. Energy1 Pulp, energy, board, and tissue capital business on long-term growth trajectory 17 Source: Leading consulting firms, RISI, management estimates Estimated market size for current offering in 2012 (EUR) • Growth in energy consumption • Demand for sustainable energy • Modernization of aging plants • Incentives and regulation • Shale gas in North America and the recession in Europe reducing demand • Growth in paper, board, and tissue consumption in Asia • Need for virgin wood pulp, as recycling rates can not grow infinitely • Increased size of pulp lines and mills • Growth in pulping in Asia and South America • World trade, e- commerce and emerging markets growth drive packaging • Shift from plastic packaging to renewable materials • Growth in emerging markets • Rise in purchasing power and living standards in emerging markets • Increasing role of digital media decreases demand for printing and writing papers • Some growth in emerging markets Anticipated long-term market growth Demand drivers BoardPulp Tissue Printing and writing papers and newsprint ~1% p.a. 2.0 bn ~1-2% p.a. 1.4 bn ~3% p.a. 1.0 bn ~3% p.a. 0.6 bn ~-1% p.a. 0.6 bn 3 November 26, 2013 Pasi Laine, CMD 2013 Pulp and Energy Paper
- 18. Global diversified footprint with large exposure to growing emerging markets Services expansion3 Exposure to emerging markets2 18 Cargotec Kone Konecranes Outotec Wärtsilä ABB Alfa Laval Atlas Copco Sandvik SKF FLSmidth Andritz GLV B&W 0% 10% 20% 30% 40% 50% 60% 70% 80% 0% 10% 20% 30% 40% 50% 60% Approximateshareofsalesgeneratedinemergingmarkets2 Service sales as % of total2 1) Illustrative exposure to emerging markets calculated by combining net sales on a carve-out basis in following areas: Asia Pacific, China and South America 2) Estimate based on latest reported annual financials and other investor relations material where geographic split and service sales / service order data is available. Estimated emerging market exposure based on company announcement (e.g. Outotec) or otherwise incl. Africa, Asia, Asia Pacific, Latin America, Middle East, South America, and depending on the reporting structure of the companies parts of ‘Rest of the world’ or ‘Other’ (the method applied may lead to potential biases in the estimate, which are thus only indicative) 3) Carve-out figures for Services business line for 2010-2013; as reported for Metso Pulp, Paper and Power -segment services sales for 2007-2009 Emerging markets expansion1 4 Net sales (EUR million) Net sales (EUR million) November 26, 2013 Pasi Laine, CMD 2013 834 847 715 877 974 1,011 748 2007 2008 2009 2010 2011 2012 Q1- Q3/2013 1,077 1,153 1,234 2010 2011 2012
- 19. Short- to mid-term profitability improvement through cost-reduction program with clearly defined steps that take profitability towards the targeted level Strong focus on profitability improvement Cost-savings program EUR 100 million We are addressing the current decline in the capital business Valmet is re-shaping its operations to become leaner, more flexible, and agile Capacity being adjusted to meet the new level of demand Current level of SG&A expense base to be lowered Additional actions to increase operational efficiency Target to reach historical gross margin levels November 26, 2013 Pasi Laine, CMD 201319 5
- 21. Weak Valmet’s policy on commenting on market outlook and the profitability of our business lines November 26, 201321 Pasi Laine, CMD 2013 Valmet will comment on its market outlook and the profitability of its business lines using the following scale: Good Satisfactory Weak Profitability will be commented on for each business line Market outlook will be split up into 5 categories Services Pulp and Energy Satisfactory Weak Market outlook Profitability Satisfactory Satisfactory Satisfactory Weak Weak Pulp TissueEnergy Board & paper Paper
- 22. Summary
- 23. 23 Valmet - unique combination of technology, capital equipment and services globally November 26, 2013 Pasi Laine, CMD 2013 Growing end-markets Global organization close to customers Global, diversified customer base Technology • ~1,800 protected inventions • High barrier to entry Capital • Established market leader • Global, diversified footprint Services • >EUR 1 bn business • >2,000 customer plants worldwide • ~70 service centers